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World Changing Ideas

13 Ways We Can Fix The "Free Market" So It Works For Regular People, Not Just The Rich

The free market doesn't exist. The market is governed by many rules, almost of all which don't benefit workers. But people made the rules, and people can change them.

In his book Saving Capitalism: For the Many, Not the Few, former U.S. Secretary of Labor Robert Reich provides an outstanding guide to many of the factors that prevent the possibility of a truly free market. He writes:

Few ideas have more profoundly poisoned the minds of more people than the notion of a "free market" existing somewhere in the universe, into which the government "intrudes." In this view, whatever inequality or insecurity the market generates is assumed to be natural and the inevitable consequences of impersonal "market forces." … If you aren’t paid enough to live on, so be it. If others rake in billions, they must be worth it. If millions of people are unemployed or their paychecks are shrinking or they’ll have to work two or three jobs and have no idea what they’ll be earning next month or even next week, that’s unfortunate but it’s the outcome of "market forces."

Reich’s point is that market forces aren’t the result of a free market, which doesn’t exist, never has existed, and probably never will exist. What we do have is a highly engineered marketplace with hundreds of thousands of rules—rules most often created behind closed doors by people who will benefit from every word and comma they put into place. These rules take endless form—the tax code, appropriations bills, new laws, court rulings, executive orders, and administrative guidance to name just a few.

Democrats and Republicans alike—at all levels of government and in all three branches—design these market forces. They grant favors to local businesses, friends, and favored industries, as well as emerging and dying technologies. While these rules are more likely to limit the liability from the disastrous effects of mountain top coal removal than they are to provide tax benefits to solar energy, most industries have figured out how to play the game. They hire lobbyists, donate to politicians—and they find the benefits exponentially greater than the cost. Journalist Nicholas Kristof noted that the chemical and pharmaceutical industries alone spent $121,000 per member of Congress on lobbying last year. Research from Harvard’s Safra Center for Ethics shows that corporations in general get up to $220 return for every dollar they "invest" in lobbying Congress.

The governing classes and elected officials have always created the rules of the economic game. These legal frameworks and the systems they support affect our nation’s economy and daily life more than the most visible government programs, including social security, food stamps, or health care. 

Reich goes on to say:

The rules are the economy. ... As the economic historian Karl Polanyi recognized [in his 1944 book, The Great Transformation, those who argue for "less government" are really arguing for different government—often one that favors them or their patrons. "Deregulation" of the financial sector in the 1980s and 1990s, for example, could more appropriately be described as "reregulation." It did not mean less government. It meant a different set of rules.

In the book 23 Things They Don’t Tell You About Capitalism, the University of Cambridge economist Ha-Joon Chang writes:

The free market doesn’t exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How "free" a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to defend the market from politically motivated interference by the government is false. Government is always involved and those free-marketeers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined "free market" is the first step towards understanding capitalism.

Our "Unfree Market"

Many opposed environmental regulations, which first appeared a few decades ago on things like cars and factory emissions, as serious infringements on our freedom to choose. Opponents asked: If people want to drive in more-polluting cars, or if factories find that more-polluting production methods are more profitable, why should government stop them? Today, most people accept these regulations, but they’re a sign of an unfree market. So some limitations on freedom (i.e., protective legislation) can be helpful. But most "unfreedoms" can be devastating. In essence, we have to choose which unfreedoms we want to live with.

Most would consider monopolies a sign of an unfree, and even an immoral market. Monsanto, through the licensing of technology with its GMO seeds, controls 90% of the soybeans and 80% of the corn planted and grown in America. According to the Center for Food Safety, this drove up the average cost of planting a single acre of soybeans 325%. For corn, the cost has risen 2,659% between 1994 and 2011. So through its monopolized control of seeds, it is driving the price of food through the roof, ensuring the starvation of millions of people around the world.

Powdered cocaine is a drug generally preferred by rich, white Americans, while the poor tend to use crack cocaine. While both are illegal, crack carries a legal penalty 100 times longer than the same substance in powdered form. It seems that there’s also no free market when it comes to jail terms. Not surprisingly, with wealth, power, and influence come lighter criminal penalties.

Higher education has also never been part of the free market. Admissions spots at universities are "sold" more often that we we’d like to believe, whether through the influence of legal donations, or powerful friends or family.

The free market is an illusion. If some markets look free, it is only because we so totally accept the regulations that are propping them up that they become invisible.

Social Inequity By Design

"We can have a democracy or we can have great wealth in the hands of a few, but we cannot have both."—Louis Brandeis

An undeniable result of this unfree market is the continued consolidation of wealth and influence. On average, CEO pay has increased 937% between 1978 and 2013. The average worker’s pay increased just 10.2% over the same period. This increase has little to do with the increasing value of these CEOs, and everything to do with the power and influence they have over the rules of the system that allow them to enrich themselves. 

The real earnings of the median male have declined 19% since 1970, and the median male with only a high school diploma saw his real earnings fall 41% from 1970 to 2010. Among those classified as poor, 20.4 million people live in what is considered "deep poverty," meaning their incomes are 50% below the official poverty line. One quarter of the nation’s Hispanics and 27% of African Americans live in poverty.

Reich writes: "There is no longer any significant countervailing force (like powerful labor unions), no force to constrain or balance the growing political strength of large corporations, Wall Street, and the very wealthy." He also describes research conducted by Princeton professors Martin Gilens and Benjamin Page, which analyzed 1,799 policy issues to determine the influence of economic elites and business groups on public policy issues compared to average citizens. It found that, "The preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact on public policy." 

The notion that we live in a democracy turns out to be just another illusion. The deteriorated state of our democracy more easily enables the wealthy and powerful to write the rules and give themselves the greatest benefits. Activists Martin Kirk and Alnoor Ladha argue that the current set of rules that articulate the values of our economic operating system can be best characterized as extractive, exploitative, greedy, selfish, elitist, hierarchical, patriarchal, life-denying, and indeed, psychotic. They invoke the Cree Indian term, wetiko, which is a cannibalistic spirit with an insatiable desire for consumption, that eventually even subsumes its host. They are essentially saying that the animating force of late-stage capitalism is the mind-virus of wetiko.

In sum, we have a system that has already chosen winners and losers. A system that elaborately ensures who gets into Ivy League colleges, gets the best jobs, makes the most money, and enjoys the most privileged lives. This is the same system that decides which businesses receive the most corporate welfare, benefit most from regulations, receive the best protection from foreign competitors, and are most likely to get the best returns on their lobbying dollars. We have, at the end of the day, the freest marketplace that money can buy. A system created by wetikos to perpetuate wetiko.

Thirteen Ways To Start Fixing The Problem

The solution lies not in a freer marketplace with less government intervention, but in a marketplace that expresses the wishes and best interests of the majority, in one that fairly protects the rights of minorities with what we might call a "democratic marketplace," driven by a commitment to justice, equity, interdependence, ecological regeneration, and the well-being of all life. 

How do we move toward this goal? Here are 13 ways to start fixing the deep psychosis of our system.

1.  Get money out of politics. We must overturn Citizens United v. FEC, support organizations like Free Speech For People (which has led an attack on the ruling), and ultimately transition to 100% publicly financed elections.

2.  Require disclosure on the source of funding for any and all documents published academically or in the public domain.

3.  Create new anti-trust laws that prevent and eliminate monopolies.

4.  End all corporate financial subsidies.

5.  End insider trading.

6. Initiate an immediate living wage and transition to a basic minimum income for all citizens.

7.  Expand the definition of unionized labor to increase the number of workers that unions represent.

8.  Set a corporate minimum tax rate of 25%.

9.  Eliminate the second home mortgage deduction.

10.  Increase funding available to fund Employee Stock Ownership Plans and build greater tax incentives for co-operatives and other forms of employee ownership.

11.  Stop transferring the cost of product externalities from business to society. The American Sustainable Business Council (which I cofounded) has a working group developing policy recommendations that would begin to move us toward full-cost accounting.

12.  Permanently eliminate payroll taxes.

13.  Mandate that women make up 50% of the directors of all public and private companies over the next three years.

This is not an exhaustive list, but rather an example of what is possible that highlights how many existing solutions already exist. We have been taught that politics and economics are separate fields. But that is an artificial distinction that serves the power elites and their agents of exploitation. We must rein in the corporate take-over of society so that we can reimagine commerce, community, and government itself, and usher in a just transition to a post-capitalist, post-wetiko world. You can .

Jeffrey Hollender (@JeffHollender) is cofounder and former CEO of Seventh Generation, and now the CEO of Sustain Natural. He is the author of six books, including How to Make the World a Better Place: A Guide to Doing Good.

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An earlier version of this article appeared in the Stanford Social Innovation Review on March 30, 2016.

[Photos: Flickr users Quinn Dombrowski, John Murphy, Tobin, Adam Swank, brownpau. vitaliy_73 via Shutterstock]

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